Biotech CEOs see Bristol-Myers' $74B acquisition of Celgene as a win

Chief executives of rival pharmaceutical companies are bullish on this morning’s news that Bristol-Myers Squibb Co (NYSE:BMY) will acquire Celgene Corp (NASDAQ:CELG) in a cash-and-stock deal valued at $74 billion.

Indeed, the tie-up, which represents one of the largest pharmaceutical deals to date, underlines how the largest pharmaceutical companies are eager to embark on the acquisition trail to boost pipelines.

“The innovation and exciting drug development going on in the peripheral biotech space is providing the pipelines for the larger pharma companies who acquire them to replenish or grow their pipelines,” Denis Corin, CEO of New York-based biotech Q BioMed Inc (OTCQB:QBIO), tells Proactive Investors. Q BioMed is a biomedical acceleration and development company.

Rodney Varner, CEO of Genprex Inc (NASDAQ:GNPX), a clinical-stage gene therapy company with a focus on cancer, is just as bullish. “It demonstrates that big pharma still has a big appetite for oncology companies, which is encouraging,” writes Varner in an email to Proactive. “I view the transaction as a positive for Genprex.”

Celgene‘s key multiple myeloma drug Revlimid comes on board

Under the deal’s terms, holders of Celgene stock will get one Bristol-Myers Squibb share, which finished Wednesday at $52.43, and $50 in cash for each share of Celgene.

The Celgene takeover is being lauded as a way to bolster Bristol’s cancer pipeline as it adds Celgene’s multiple myeloma drug Revlimid to its portfolio. With the deal, Bristol also assumes control of experimental CAR-T therapy manufactured by Juno Therapeutics, which was recently acquired by Celgene. 

READ: Celgene slumps as US FDA rejects filing for key multiple sclerosis drug

The combined company will boast nine drugs with more than $1 billion each in annual sales, with Bristol’s flagship lung-cancer drug Opdivo still drawing considerable attention. The merged company will also control an array of treatments still in the initial stages of development that are expected to create revenue of more than $15 billion.

“Together with Celgene, we are creating an innovative biopharma leader, with leading franchises and a deep and broad pipeline that will drive sustainable growth and deliver new options for patients across a range of serious diseases,” said Giovanni Caforio, CEO of Bristol-Myers Squibb, in a statement.

Bristol-Myers shareholders to control new company

When completed, Bristol-Myers Squibb shareholders are set to own about 69% of the company while Celgene shareholders will control 31%.

QBioMed’s Corin says the deal reinforces his company’s strategy of acquiring undervalued or developmental assets that can primed for generating commercial returns on their own or via an acquisition by a larger player.  In keeping with its rulebook, the company recently scored a big coup by acquiring the metastatic skeletal cancer pain drug Metastron from GE Healthcare.

Rodney Varner of Genprex, meanwhile, is hopeful about a partnership with the newly merged company as strong pre-clinical data from MD Anderson’s Cancer Center suggests Genprex’s gene therapy works with checkpoint inhibitors such as Opdivo and Yervoy, developed by Bristol-Myers.

“It seems clear that Bristol-Myers Squibb and others are seeking to add additional drug combinations to enhance the effectiveness of their immunotherapies, which bodes well for us,” Varner concludes.

Impact on Celgene shareholders

Bob Byrne, a Proactive contributor, points out that the offer provides a much-needed lifeline for shareholders of Celgene, which has seen its stock plunge nearly 60% from its all-time high of $145.82 in September.

“Celgene has been plagued by clinical and regulatory missteps over the past 12-plus months and shareholders have been left to pay the price,” Byrne says.

But Byrne also warns that Bristol-Meyers shareholders might revolt at paying nearly $75 billion and vote against the acquisition. 

“Since it’s unlikely that other suitors are lurking in the shadows willing to pay a higher price for Celgene, if I were a Celgene shareholder, I’d liquidate my investment before any disgruntled Bristol shareholders have a chance to put up a fight,” he says.

In a note to investors, Baird analyst Brian Skorney called the buyout a “very good deal” for Celgene, per a published report. Skorney said the deal’s success depends on the results of Revlimid patent litigation, with worries still lingering about the drug losing patent protection in the US. But the marriage represents a “big win” for Celgene shareholders.

Skorney estimates that the tie-up could be valued at more than $95 per share for Celgene stockholders.

Celgene shares jumped 24.4% to $82.92 post the deal’s announcement on Thursday while Bristol shares shed 13.2% to hit $45.15.

–Contact Ellen Kelleher at [email protected]

Story by ProactiveInvestors